To: Merritt who wrote (52562 ) 3/19/1999 4:41:00 AM From: Kerry Lee Read Replies (2) | Respond to
I cannot speak for KJM, but my take is slightly different regarding Fibre Channel switch market and ANCR metrics. My best ballpark guesstimate for Fibre Channel /SAN switch market is $60-80 million in 1999, $200 - 300 million in 2000 and $400-600 million in 2001. For argument's sake, take the high end of the range. In the last conference call, during the Q&A , the Ancor CEO responded to a question by stating he would be disappointed if Ancor did not win 33-50% of the OEMs available. An "average" Tier 1 OEM is estimated to be worth upwards of $30 million/year in revenue to the FC switch vendor. Industry rumors are that one of Ancor's main competitors, Brocade Communications ( private Silicon Valley company co-founded by ex-HWP/SUNW employees )is shipping $20 + million to one account, Sequent. SQNT only does $600 M/year in server sales, so imagine the potential volume that could be generated by larger server/storage companies like CPQ, DELL, EMC, HDS, IBM, DGN, SUNW, HWP. Going back to the example of high range of market estimate for Yr 2K of $300 million and using the low end of the market share of 33%, a potential revenue forecast of $100 million for Yr 2 K is plausible ( assume gross margins of 40-50% if you want to spreadsheet all the way down to P&L ). Assuming current market valuations for data communications companies don't take a huge hit, then a price-to-sales ratio of 6 - 10 times is doable. Actually, I think ANCR fully diluted shares are probably closer to 28 million shares taking into account the INRANGE ( division of the former General Signal) warrants and employee stock options..IF you believe that $100 million revenue is a good number of Yr 2000, then PSR of 6 yields a market cap of $600 million and PSR of 10 yields a PSR of $1 billion, translating to share prices of $21-36, assuming no further dilution.This is based on the assumption that Wall St will value ANCR on forward 12 months sales and more analysts some on board sometime in second half of 1999. OBVIOUSLY, Wall St is looking for evidence of both SAN market growth ( in particular FC switches) and ANCR OEM wins with Tier 1 accounts before they are prepared to believe that $100 million is doable for a company like ANCR.When they get to Q1 Yr 2K, they will project Yr 2001 revenues and the market will price accordingly. Therefore, a stock price of $30 sometime in 1999 is admittedly optimistic but still doable and further upside from $30 in Yr 2000 can also be rationalized based on Yr 2001 revenue forecast. Before you say I'm crazy, I got in on the WEBT IPO at $13, sold it for $35 the day of the IPO ( on the basis of $8 million trailing 12 months sales and $400 million market cap )..and it still soared close to $60 ( $700 million market cap ). WEBT is NOT an Internet portal or even an ISP. It is a software company that just happens to sell web tracking software. Wall St loves the WEBT story and the fact that it has a VP from Yahoo on its BOD doesn't hurt.
